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TOKYO (MNI) – The median forecast by economists for Japan’s GDP in
fiscal 2011 has been revised up slightly to +0.4% on year from their
previous call for a 0.3% rise, while their consensus for fiscal 2012 was
revised down to +2.5% from +2.7%, the latest Market News International
survey showed.

Revised forecasts by some economists followed the Aug. 15 release
of GDP for the April-June quarter.

The Q2 real GDP fell 0.3% on quarter (annualized -1.3%), stronger
than the consensus call for -0.7% (annualized -2.6%), as personal
consumption, capital investment and net exports came in better than
expected.

The economists’ median forecasts compare with the government’s
latest growth projections for +0.5% for fiscal 2011 and +2.7% to +2.9%
in fiscal 2012.

Many economists said the supply chain recovery from the March
earthquake disaster has been quicker than they had expected initially.

Many economists see demand for reconstruction of quake-hit northern
areas and public demand backed by a third disaster-response
supplementary budget for fiscal 2011 will stimulate the economy in the
July-September quarter onward.

Meiji-Yasuda Life forecasts that the Q3 GDP will show an annualized
rise of +5.3%, which would be the first growth in four quarters.

Industrial production — a coincident index for the overall
economic climate — is expected to post its first gain in five quarters
in July-September, up by 8.2% q/q, if forecasts by producers in the
latest government survey for July and August output are met and
September output remains unchanged from August.

But economists said such strong growth is unlikely to be
sustainable in fiscal 2012, as the strong yen and slower overseas
economies will hurt Japan’s export-led, modest recovery.

The dollar remains weak in a Y76 to Y77 range while major
manufacturers have made their business plans on the assumption that the
U.S. currency will average at Y82.59 in the current fiscal year,
according the BOJ’s June Tankan survey.

The government has said the appreciation of the yen against the
dollar by 10% would lower Japan’s GDP by 0.2 percentage point in a
12-month period.

The Bank of Japan’s real export index rose an seasonally adjusted
0.3% on the month in July, decelerating from +7.9% in June and +4.3% in
May, indicating that once production and shipments have recovered from
the aftermath of the disaster, Japan may not be able to count on sharp
export growth in the face of slower overseas demand.

Morgan Stanley MUFG said a slowdown in global economic growth by a
full percentage point would push down Japan’s GDP by 1.5 percentage
points.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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